US dollar index futures (June delivery) exploded higher in recent weeks, as the global pandemic crisis has ignited a dollar liquidity shortage. The price is now trading at three-year highs, with the structure on the weekly chart consisting of higher highs well above the 50- and 200-week moving averages (MAs), which posted a ‘golden cross’ in mid-2019. Hence, the picture is positive, and a weekly close above the almost two-decade high of 103.80 could add more gasoline to the rally.
Weekly oscillators concur. The RSI is ready to test 70, while the MACD – already positive – is rising above its red trigger line.
If buyers stay in control and manage to pierce above 102.85, then their next target might be the 103.80 zone, which was the peak back in 2017 and a level previously seen in late 2002. If this level is penetrated too, that could recharge the bulls, turning the focus to 105.40 next – this being the inside swing low of September 2002. Higher still, the December 2002 high of 107.30 could halt the advance.
If the bears take the wheel, initial support might come from the 101.20 area, where a downside break could open the door for a test of 99.35.
In short, the long-term outlook is positive and a close above 103.80 could reinforce that. For the bullish picture to come into doubt, the bears would need to push back below 95.35.
